Question

1. Each of the following is a reason that an item on the balance sheet could diverge from the corresponding component on the operating section of the SCF except:

a. foreign currency transaltions

b. acquisitions and divestitures of businesses

c. inter-industry subsidiaries

d. ​​​​​​​large cash investing and financing activities

2. The distinction between real and nominal variables is known as:

a. time zone horizon

b. classical dichotomy

c. FOREX fluctuations

d. operational liquidity

Answer 1

1. The answer to this question is option (d)large cash investing and financing activities. It is because large cash investing and financing activities is the only reason because of which an item on the balance sheet does not diverge from the corresponding component on the operating section of the SCF. The other options (a), (b) and (c) are not correct because due to these reasons an item on the balance sheet can diverge from the corresponding component on the operating section of the SCF.

2. The answer to this question is option (b)classical dichotomy. It is because classical dichotomy implies that real variables and monetary variables are independent of each other and so they are different from each other. The other options (a), (c) and (d) are not correct because of the above reason and they are all of different meanings.